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The following rules apply when owners of mixed-use assets are required to calculate an adjustment for GST input tax.
This adjustment applies:
If an apportionment has already been made under existing rules, the new rules will only apply to goods and services (rates, insurance etc) from the above dates.
The calculation is based on the income-earning days and private use days of the asset using this formula:
income-earning days + private days
|Input tax||is the total input tax for the mixed-use expenses.
Excludes input tax on expenditure relating solely to taxable days and non-taxable days.
|Income-earning days||is the total number of days when rent or a fee is paid for the use of the asset, regardless of the amount paid. Includes family, non-associated persons and any income-earning use spent repairing or relocating the asset.|
|Private days||is the total days the assets is used with no amount of rent or fee paid|
You can use other measures in the apportionment formula if they reflect the time the asset is used more accurately. For example:
You calculate the adjustment for an adjustment period to get the amount of GST input tax to return.
The definition of "income-earning days" differs from the days used to calculate the amount of expense allowed as a tax deduction. For GST purposes it includes all days any consideration (rent) is received irrespective of the percentage of market rate paid.
Regan purchases a charter boat on 1 April 2014 for $450,000 which is used both to earn income and for private use. He accounts for GST input tax for the year as follows:
|annual Maritime NZ survey fees||
|food/drinks (charter guests only)||
Regan claims the full input tax and no adjustment is made as the expenses relate solely to income-earning.
$250 for family fishing licenses is a private expense, so no GST input tax is claimed.
There are apportioned (mixed-use) expenses that relate to both income-earning and private use.
When Regan acquired the boat he estimated that the taxable use would be 50%. He claimed input tax on the mixed expenses of 29,735.86 (credit) as follows:
|Expense||Cost||GST value||50% input tax claimed|
|purchase of boat||
|mooring fees, insurance, fuel||
|Total input tax||
During the year the boat was used:
|days fully chartered to the public||
|days chartered at 50% market rate to Regan's local fishing club||
|days the family used the charter boat without making any payment.||
income-earning + private days = 152
Total input tax (boat $58,695.65 + mixed-expenses $776.09) = $59,471.74
The calculation is:
|= $47,733.90 input tax|
Regan claimed input tax of $29,735.86 during the year. He is entitled to claim a further amount $17,998.04 (credit) as an adjustment for input tax in his final GST return of the year. The calculation is:
|$47,733.90 minus $29,735.86||=||$17,998.04|
You can find more information in our Tax Information Bulletin, Vol 25, No 9, October 2013 pages 21-22.